Jamie Spencer
U.S. consumer prices rose in November by 0.3%, marking the largest increase in seven months, according to the Labor Department. This uptick aligns with economists’ expectations and highlights persistent inflationary pressures despite moderating rent and motor vehicle insurance costs.
Rents and core inflation offer encouraging signs
Rents rose at their slowest pace in nearly 3.5 years, increasing by just 0.2%. Motor vehicle insurance costs edged up only 0.1%, while shelter costs, including lodging, saw a notable jump of 3.7%. Analysts see these trends as potential signs of a broader cooling in services inflation.
Annual inflation trends and tariff concerns
The Consumer Price Index (CPI) climbed 2.7% year-over-year, a slight increase from October’s 2.6%. However, core inflation, excluding volatile food and energy prices, remained stagnant at 3.3% annually for the fourth consecutive month. Economists warn that tariffs proposed by President-elect Donald Trump’s administration could pose risks to this fragile progress.
Goods and services inflation dynamics
Goods prices rose 0.4%, driven by higher costs for new and used motor vehicles, reflecting replacement demand from hurricane-damaged regions. Meanwhile, healthcare services costs increased by 0.4%, contributing to an overall 0.3% rise in service prices.
Fed poised for third consecutive rate cut
Financial markets are heavily pricing in a quarter-percentage-point rate cut at the Federal Reserve’s Dec. 17-18 meeting. Despite minimal progress in combating inflation, policymakers are expected to adopt a dovish stance to support the cooling labor market.
Market reactions and future outlook
Wall Street stocks ended mostly higher, and Treasury yields fell following the inflation report. While investors remain optimistic about moderating rent costs and stable core inflation, concerns linger over potential price pressures from tariffs and immigration policies.
